### Understanding Bad Debt Expense and Allowance for Doubtful AccountsBlossom Corp employs the percentage-of-receivables basis to determine its bad debt expense. Here, we present a scenario where Blossom Corp needs to adjust their records to account for this.#### Account Balances:- **Accounts Receivable (ending balance):** $610,000 (debit)- **Allowance for Doubtful Accounts (unadjusted):** $5,300 (debit)The company anticipates that 2% of its accounts receivable will become uncollectible.### Steps to Record the Adjusting Journal Entry**(a) Adjusting Journal Entry for Bad Debt Expense:**To record bad debt expense for the year, follow these steps:1. **Calculate the estimated uncollectible amount:** - 2% of $610,000 = $12,2002. **Determine the required adjustment:** - The current (unadjusted) allowance is $5,300 (debit). - Required ending balance for Allowance for Doubtful Accounts is $12,200. - Adjustment needed: $12,200 - (-$5,300) = $17,5003. **Prepare the journal entry:** | Account Titles and Explanation | Debit | Credit | |-------------------------------|------------|------------| | Bad Debt Expense | $17,500 | | | Allowance for Doubtful Accounts| | $17,500 |**(b) Adjusted Balance Calculation:**- **Ending (adjusted) balance in Allowance for Doubtful Accounts:** \[ \text{Adjusted Balance} = \text{Unadjusted Balance} + \text{Adjustment} \] Using the calculated amounts: \[ \text{Ending Balance} = -$5,300 + $17,500 = $12,200 \]**(c) Calculating the Cash (Net) Realizable Value:**- **Formula:** \[ \text{Net Realizable Value} = \text{Accounts Receivable} - \text{Ending Balance of Allowance for Doubtful Accounts} \] Using the data provided: \[ \text{Net Realizable Value} = $610,000 - $12,200 = $597,

Allowance for doubtful accounts –Allowance for doubtful accounts is the provision made by the…

Blossom Corp uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance) Allowance for doubtful accounts (unadjusted) The company estimates that 2% of accounts receivable will become uncollectible. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation (b) $610,000 (debit) 5,300 (debit) What is the ending (adjusted) balance in Allowance for Doubtful Accounts? Ending (adjusted) balance in Allowance for Doubtful Accounts (c) What is the cash (net) realizable value? Cash (net) realizable value $ Debit $ Credit

Blossom Corp uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance) Allowance for doubtful accounts (unadjusted) The company estimates that 2% of accounts receivable will become uncollectible. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation (b) $610,000 (debit) 5,300 (debit) What is the ending (adjusted) balance in Allowance for Doubtful Accounts? Ending (adjusted) balance in Allowance for Doubtful Accounts (c) What is the cash (net) realizable value? Cash (net) realizable value $ Debit $ Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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